In a landmark judgment in India, delivered by Sri PWC
Davidar, IAS, the Adjudicator of Tamil Nadu (also the IT Secretary) has
passed an award for payment of Rs 12.85 lakhs to a petitioner who alleged a
fraudulent withdrawal from his ICICI Bank account. Bank contended that the
issue involved customer negligence and did not fall under the jurisdiction
of the adjudicator.

However in a well reasoned judgment copy of which is
available
here
(PDF copy size 2 MB) the Adjudicator held that an offence is made out under
ITA 2000 and it falls under the jurisdiction of the adjudicator.

The honourable adjudicator proceeded to accept the
petitioner’s argument that the Bank had not exercised due diligence and
therefore was liable under Section 85 of the Act to pay the compensation.

One of the main points highlighted in the judgment is
that the Bank failed to use appropriate authentication of its e-mails to
customers in the form of “Digital Signatures”. Bank’s systems and procedures
before and immediately after the commission of the offence and the lack of
KYC responsibility was also highlighted.

Since there are hundreds of Phishing frauds that are
happening in the Indian scenario, this judgment is likely to be welcome by
millions of Internet Banking customers in India.

As the author has been emphasizing for a long time, non
adoption of digital signatures by Banks for authenticating Internet Banking
transactions is a matter of utter disregard to the laws and RBI guidelines
and this judgment would help in restoring some responsibility amongst the
Bankers.

The undersigned had recently offered to one the
Chiarman’s of a Bank (who is also the chairman of Indian Bank Association)
that digital signature can be provided to every one of their customers at
the cost of the annual fee they are now charging for servicing the account.

Regrettably there was no response from the Bank. I hope
the Chairman of IBA will review the proposal and mandate introduction of
digital signatures in Bank-customer communication besides taking other
security initiatives as suggested in the judgment.